Reinsurance News

The continued and growing appetite of third-party, capital markets investors to access insurance and reinsurance-linked exposures through the features of the insurance-linked securities (ILS) market suggests a flattening of the reinsurance market cycle, according to speakers at the 2016 SIFMA IRLS event.

Reinsurance reserve releases have been slowing over recent quarters for many in the sector, with the fourth-quarter of 2015 seeing more reinsurers reporting smaller releases, rather than larger, a trend that analysts at Keefe, Bruyette & Woods expect will continue.

Investments in private insurance-linked securities (ILS) mechanisms is a growing sub-sector of the overall ILS space, and its attractiveness to third-party investors as a viable asset class is supported by the illiquidity premium offered, according to Sandro Kriesch of Twelve Capital.

According to Fitch Ratings there may be a reinsurance regulatory arbitrage available that could benefit U.S. reinsurers, as cedants in Europe look to offload more of their risks, due to higher capital requirements under Solvency II, while reinsurers outside of the S2 framework could have an advantage.

Widespread flooding and severe convective thunderstorm weather in the U.S. over just the last week is expected to result in an economic loss of over $1 billion and insurance or reinsurance industry impact in the hundreds of millions of dollars, according to Aon Benfield.

The innovation and evolution of the insurance-linked securities (ILS) space has seen its capacity get ever closer to primary insurance risk, supported by access to more detailed data and improved risk selection, according to John Butler of Twelve Capital.

Reinsurance companies won’t be designated as systemically important (G-SII) because they aren’t systemic, according to SCOR CEO Dennis Kessler, a view that is also held by rating agency Standard & Poor’s.

Average returns on equity (ROE) across a group of property & casualty reinsurance firms operating in the U.S. have tumbled “materially” on an operating basis and “precipitously” on an income basis, according to rating agency Fitch.

Australia and New Zealand focused insurance firm Youi is back looking to access the ILS capacity with its second syndicated collateralized reinsurance note issuance, according to market sources, as it seeks to cement the use of capital markets cover within its reinsurance tower.

Global reinsurance player Swiss Re has released its own measure of earnings performance today, reporting lower Economic Value Management (EVM) income and profit in 2015. But, perhaps more interestingly, the firm also noted its willingness to disrupt and bypass traditional channels to access risk.